United States District Court, D. South Carolina
ORDER OF DEFAULT JUDGMENT AS TO ROY LEE COOKE, INDIVIDUALY AND AS REPRESENTATIVE OF THE ESTATE OF BETTY BEACH COOKE
This matter is before the court by way of a motion by Plaintiff New Horizons Franchising Group, Inc. (“Plaintiff”), formerly New Horizons Computer Learning Centers, Inc., for default judgment as to Defendant Roy Lee Cooke, individually and as Personal Representative of the Estate of Betty Beach Cooke (“Defendant”), pursuant to Fed.R.Civ.P. § 55(b). (ECF No. 31.)
On August 18, 2014, Plaintiff filed this action against Defendants, Cooke & Moses, LLC, The Green Owl, LLC, Jeffrey H. Moses and Larraine L. Moses, seeking to recover the unpaid balance due for royalty fees and for merchandise sold and delivered under three franchise agreements guaranteed by Betty Beach Cooke and Roy Lee Cooke. (See ECF Nos. 1, 15.) Defendant failed to answer the Complaint, move in response to the Complaint, or otherwise defend within 21 days after service of process. (See ECF Nos. 15-31.) On January 27, 2015, Plaintiff filed the instant, unopposed Motion for Default Judgment as to Defendant. (ECF No. 31.) Thereafter, Plaintiff requested Entry of Default on February 2, 2015, which the Clerk entered on the same day. (See ECF Nos. 32, 33.)
The court has jurisdiction over this matter pursuant to 28 U.S.C. § 1332(a)(1) based on the Complaint’s allegations that there is complete diversity of citizenship between the parties and the amount in controversy exceeds $75, 000.00. (ECF No. 1 at 1 ¶¶ 1-5, 2 ¶6, 8 ¶36.)
II. Choice of Law
In a diversity suit federal courts must apply the rules of the forum state when addressing choice of law questions. See Erie R. Co. v. Tompkins, 304 U.S. 64, 58 (1938). South Carolina choice-of-law rules dictate that the court must apply the law specified in a contract. See Burris Chemical, Inc. v USX Corp., 10 F.3d 243, 245 (4th Cir. 1993) (citing Bannister v. Shepard, 4 S.E.2d 7, 9 (S.C. 1939); Livingston v. Atlantic Coast Line R.R. Co., 180 S.E. 343, 345 (S.C. 1935)). In the instant case, the franchise agreements from 2004, 2006 and 2008 indicate that California law shall govern the franchise agreements. (See ECF 15.) The 2004, 2006, and 2008 guaranty agreements signed by Betty Beach Cooke and Roy Lee Cooke also state that California law shall govern the agreements. (See ECF 15.)
III. Default Judgment
The court may enter a default judgment against a party that has not properly responded to a complaint in a timely manner. Fed.R.Civ.P. § 55. A defendant has 21 days to file a written response before they may be entered as in default. Fed.R.Civ.P. § 12(a)(1). When a defendant defaults the court is to accept as true the well-pleaded factual allegations in the complaint as to defendant’s liability. See Ryan v. Homecomings Fin. Network, 253 F.3d 778, 780-1 (4th Cir. 2001). Unlike allegations of fact, the court does not accept allegations regarding damages as true, but rather makes its own independent determination. E.g., Credit Lyonnais Secs. (USA), Inc. v. Alcantara, 183 F.3d 151 (2d Cir. 1999). In this regard, “[a] default judgment must not differ in kind from, or exceed in amount, what is demanded in the pleadings.” Fed.R.Civ.P. 54(c).
In this matter, Defendant failed to plead or otherwise defend within 21 days and is now in default. Therefore, Plaintiff’s allegations in the Complaint are deemed admitted and it is entitled to a default judgment against Defendant. Fed.R.Civ.P. 55(b)(2). See, e.g., Bank Meridian, N.A. v. Motor Yacht “It’s 5 O’Clock Somewhere” Official No. 1073764, C/A No. 2:09-594-MBS, 2011 WL 2491369, at *2 (D.S.C. June 21, 2011).
When a contract is breached, damages are determined by the amount that will compensate the aggrieved party for all detriment proximately caused, or likely to be caused, by the breach. Cal. Civ. Code § 3300 (West 2015). When the operation of an established business is prevented or interrupted by a breach of contract, damages for the loss of prospective profits may be recovered. See Grupe v. Glick, 160 P.2d 832, 840 (Cal. 1945). The prospective profits must have otherwise been made from the operation of the business and must be ascertainable with reasonable certainty from the past volume of business and other provable data relevant to future sales. Id. A franchisor may recover future royalty payments if the franchisee is the proximate cause of the breach. See Postal Instant Press, Inc. v. Sealy, 51 Cal. 2d 365, 370 (Ct. App. 1996).
In the present case, Plaintiff alleges that the franchisees breached the contract when they failed to make timely payments. Defendant, as guarantor of the franchise agreements, is therefore liable for future royalty payments.
Based on the foregoing, and upon consideration of the Summons and Complaint, the franchise agreements, the guarantee agreements, the Affidavit of Joseph DiPlacido, the Affidavit of Default, and the Motion for Judgment by Default, the court GRANTS Plaintiff’s motion for Default Judgment against Defendant Roy Lee Cooke, individually and as Personal Representative of ...